By Frank Walbaum, Market Analyst at Naga
The US dollar was mostly unchanged on Thursday as investors avoided major positioning ahead of the Federal Reserve’s Jackson Hole symposium. Market participants remain cautious, with sentiment restrained by concerns about monetary policy and political risks.
Attention now shifts squarely to Fed Chair Jerome Powell’s address on Friday. Markets are pricing in an 81% chance of a quarter-point rate cut in September. Another cut is expected in December. While recent minutes revealed the committee remains primarily focused on inflation risks, weaker labor market data and tariffs risks have widened internal divisions. Investors are watching closely to see whether Powell will adopt a cautious tone, challenging expectations of imminent easing, or validate the current market view.
In the meantime, the market could also react to the release of the jobless claims data today. The latter could provide a clearer picture of the direction of the jobs market and could influence the expectations toward monetary policy. A weaker job market could bolster anticipations of interest rate cuts and weigh on the dollar.
Treasury yields rose slightly across the curve, while the 10-year benchmark held near 4.3%, steadying after two sessions of declines, but remained close to the levels seen during the last few days. Investors could remain reluctant to take strong positions before Powell’s remarks, with dovish signals likely to pressure both the dollar and yields; a more cautious stance could drive them up.
Political risks stayed in focus after President Donald Trump called for Governor Lisa Cook’s resignation. The episode has raised renewed concerns over the Fed’s independence, adding a layer of uncertainty.
